Biofuel: Here’s What The Future Holds

The CPI for May fell -0.1%, slightly less than expected and the first dip
in ten months. Core was 0.1%, also slightly less than expected  Business
Inventories rose +0.3%, less than expected.  Empire Manufacturing
was 11.6.  Industrial production rose +0.4   Capacity
was 79.3%.  The EIA reported that crude oil
inventories fell 1.8 million barrels. Gasoline inventories fell 900K  
Distillate stocks rose 2.5 million.

The Fed’s Beige Book said price pressure were moderate for all districts
and expansion was sold and well sustained. Labor markets improved in most
districts and the service sector was solid. Some districts reported a slight
softening in new home sales. Most districts said high gas prices hurt retail
somewhat. Tourism was strong, especially in New York.

OPEC will increase production by 500K barrels per day.  Oil is at a
7-week high and over $56. OPEC produces 40% of the world’s crude. The cartel
anticipates an additional 1.5 million barrel per day demand in Q4. Saudi
Minister Al-Naimi said OPEC is well supplied and the limited refining capacity
is causing a bottleneck and resulting higher prices.

The Senate voted to increase the amount of
used in the U.S.  The proposal amends an energy bill and
requires 8 billion gallons of biofeul to be blended into the nation’s fuel
supplies by 2012. Biofuel (ethanol is an example) is made from corn, sugar and
agricultural products and is mixed with gasoline to make it burn more cleanly.
Separately, the Senate will debate the need to cut oil imports and Democrats are
set to introduce a proposal that would cut imports by 7.65 million bpd by 2025.

Fed Governor Donald Kohn said the U.S.
economy is in “unexplored territory,” making it difficult for the Fed to get a
handle on the outlook.

A weaker dollar and renewed fund interest sent the
metals higher, with August gold closing up $2.10 to $431.40.

A dry outlook sent soybeans higher.

Cocoa traded higher as disarmament in the Ivory Coast
may not be on track.